Company new cost of equity, Accounting Basics

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Company new cost of equity

Problem: Kunitz Co. has no debt. Its cost of capital is 10.6 percent. Suppose Kunitz converts to a debt-equity ratio of 1. The interest rate on the debt is 7.7 percent. Ignore taxes for this problem.

Requirement:

Question 1: What is the company's new cost of equity?

Question 2: What is its new WACC?

Note: Provide support for rationale.

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Accounting Basics: Company new cost of equity

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Accounting Basics: Company new cost of equity

Reference No:- TGS0888311

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